We should worry about what they haven’t discussed in Brussels

It hardly seemed the day for it, but Europe's political leaders enjoyed the red carpet treatment on Wednesday as they arrived for yet another crisis summit.

Apparently Wednesday night's meeting was the 14th such emergency conference in 21 months – about one every six weeks.

As they climbed out of their limousines in Brussels, our leaders adopted the "summit face" for the benefit of reporters, photographers and television crews. The summit face has been well and truly rehearsed by now and the best offer a subtle smile to offer a hint of reassurance but combine that with a set jawline plus frowning eyebrows to reflect the seriousness of the situation. It's quite hard to pull off convincingly, although after 14 attempts most practitioners have got to grips with at least a basic version. David Cameron has quickly become a leading exponent, showing others how it should be done – this has not always gone down well with his euro counterparts such as Nicolas Sarkozy, who believes Anglo Saxon upstarts such as Cameron shouldn't be trying to show him what's what in Europe.

But while the summit face has more or less been accepted as standard by leaders, the summit haircut still divides opinion. That's going to take a bit longer to sort out. However, this is politics. An Oscar night feel to proceedings at least added an element of drama to proceedings and, if you wind back 18 months to two years, progress is being made, however infuriating its stop-go nature.

Back then Greek bail-outs, a European Financial Stability Fund, and bank write-downs of as much as 50pc of Greek sovereign debt were being laughed out of court within the eurozone countries. Paris, Berlin, Rome, even Athens were in full denial. Now such measures are reality and lurching towards completion. Arguments between banks and the European Union over writedowns appear to centre on important technicalities, but technicalities all the same, such as future insurance arrangements for new bond issues.

Ultimately the eurozone is a muddle, always has been, and it muddles through as a result. Wednesday night was another staging post along the way towards an inevitably ugly resolution, albeit a temporary one. Until all eurozone members are forced to comply with the same fiscal disciplines so that credit ratings and bond yields converge there is nothing to stop the problems of the past two years re-emerging. Similarly, the imbalances within the eurozone will have to be addressed, as they must throughout the world, and the lack of competitiveness of nations such as Greece solved in a meaningful way. However, adjusting costs, such as wages, while maintaining a fixed exchange rate is a painful process resulting in cuts, unemployment and the civil unrest that has become an Athenian way of life.

Don't be surprised if key elements of the eurozone rescue plan are still being discussed at the G20 meeting in Cannes a week on Thursday as the sticking plaster begins to be applied.
Longer-term, however, the fundamentals of the eurozone construct are still flawed. The fault lines remain. And that's not yet on the agenda of any summit.

But it's not all doom and gloom

While political leaders were having a difficult day addressing their respective parliaments in Berlin, Rome and London, business leaders elsewhere in the world were having a pretty good day, on the whole.
Whether it was in the UK, US or indeed in Europe, the good news was very much outweighing the bad. Corporate earnings in America are coming in strong and beating estimates, albeit estimates that had been previously lowered.
Big names such as Boeing reported strong performances. Here, GlaxoSmithKline returned to sales growth. In Germany SAP, the world's leading supplier of business management software, reported higher sales and a stable outlook as its corporate customers use their financial stability to innovate and grow through investment in improved operational systems. The still improving corporate scene is not all being driven by emerging markets either.
US demand for durable goods rose in September by the highest amount in six months, while purchases of new houses rose more than 5pc, way ahead of expectations as the over-supplied housing market begins to clear thanks to lower asking prices. The world's biggest economy, by some distance, is showing signs of improvement.
Of course it's patchy, but it's wrong to say it's all bad news for employers.
That's said, there is no margin of error for policy makers. October's CBI industrial trends survey published on Wednesday showed output expectations and optimism among UK manufacturers falling to a point consistent with previous recessions. Business leaders can hang on for only so long to improvements they've engineered. While earnings surprise on the upside, the risk now is that politics will continue to disappoint on the downside.
damian.reece@telegraph.co.uk
From: http://www.telegraph.co.uk  

EU leaders reach crisis deal

Private investors have agreed to accept losses of 50 per cent on their Greek bonds, an official says, removing the last apparent roadblock to a broad European plan to solve the continent’s debt crisis.

At the emergency summit in Brussels, European leaders had already agreed to force banks to raise €106 billion ($A142.33 billion) by June - partially to ensure they could weather the expected losses on Greek debt.

Details of the deal are beginning to emerge, with French president Nicolas Sarkozy telling a press conference that there will be no Greek default.

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He said that Greek losses for investors would be about €100 billion and that Greek debt will fall to 120 per cent of GDP - but not until 2020.

According to Mr Sarkozy, the bailout fund will set up "powerful firewalls" to prevent contagion.

EU leaders also neared agreement on boosting the firepower of the continent’s bailout fund in order to prevent larger economies from finding themselves in need of a rescue like Greece’s.

The leaders are under immense pressure to finalise their plan after multiple delays and half-baked solutions.

Market confidence was waning and fears were growing that the two-year-old crisis could push Europe and much of the developed world back into recession.But the third prong of their plan - finding a way to reduce Greece’s crushing debts, which are on track to top 180 per cent of economic output - had been proving difficult.

German Chancellor Angela Merkel told MPs in Berlin that the goal was to bring Greece's debt down to 120 per cent of economic output by 2020.

There were concerns that that would require losses that the banks weren’t willing to take on voluntarily. Having a voluntary deal is important because imposing losses on banks can trigger massive bond insurance payments that risk creating huge turmoil on global financial markets.

A European official said today that a voluntary deal had been reached.Another official confirmed that the banks agreed to take losses of 50 per cent of their Greek bonds.

According to Greece’s debt inspectors that would take the country’s debt to just above 120 per cent by 2020.

The officials spoke on condition of anonymity pending an official statement.A spokesman for the organisation that has negotiated on behalf of the banks said he would release a statement soon, without confirming the deal.

Australian share trading has been halted as the ASX deals with a trading glitch, leaving investors unable to react to earnings news and developments in Europe.

"It's risk on," said Bell Direct equities analyst Julia Lee. "I would expect the market to have traded up by 0.4 per cent by now if it could."

Australian markets have tracked the European-US dollar trade since the beginning of the month, she said, as attention turned toward Europe's bail-out troubles. The euro has gained 1 per cent against the greenback today on the news of the European agreement, or 1.4 US cents. Ms Lee said the Australian shares would probably be moving in line with that currency pair if they could trade.

"Risk currencies are gaining and risk assets are gaining," she said.

Also Asian stocks and US futures are moving higher, which would most likely lift local stocks.

At a press conference in Canberra a short time ago, Federal Treasurer Wayne Swan said the world must see a comprehensive plan from European leaders to deal with sovereign debt problems.

"We cannot afford any more stumbles or missteps from the Europeans. It's critical that we see a comprehensive plan announced by European leaders as soon as possible," Mr Swan said.

"It needs to be a durable and credible plan and it needs to be for the long term."

The world had paid a very high price for Europe’s failure to act over the past 18 months, Mr Swan said.

The federal government fears a recession in Europe could spread to the rest of the global economy.